GST council may restrict use of tax credits accumulated by builders

The GST Council, which is scheduled to meet on March 19, may restrict the use of tax credits accumulated by builders and allow a concessional rate for up to 10% of commercial property, such as shops, in residential complexes, expecting developers to pare prices. At the last meeting, the council — comprising state and Union finance ministers — had agreed to reduce the levy on under-construction residential projects to 5% without input tax credit (ITC) from the current 12%, with credit for taxes paid on inputs such as paints, steel, cement and sanitary ware. For affordable housing projects, the rate will be slashed to 1% without ITC from 8% with tax credit. But the modalities for the rate reduction, which will be effective, are yet to be worked out. Sources indicated that the officials were in favour of accepting the recommendations of a ministerial panel, which had suggested that intermediate tax on development rights, lease premium, floor space index and similar items should be exempted for houses where a completion certificate has not been issued.